EXHIBIT 10.132
Daniels & Associates Jefferson Capital Group, Ltd.
767 Fifth Avenue One James Center, Ste. 1400
48th Floor 901 East Cary Street
New York, NY 10053 Richmond, VA 23219
January 1, 1995
Carolco Pictures Inc.
8800 Sunset Boulevard
Los Angeles, CA 90069
Attn: Robert W. Goldsmith
Senior Vice President
Gentlemen:
We are pleased to set forth the terms of the retention of Daniels &
Associates, L.P. and Jefferson Capital Group, Ltd. (collectively, the "Financial
Advisors") by Carolco Pictures Inc. (collectively with its affiliates, the
"Company"). The Financial Advisors will assist the Company in connection with
the activities enumerated in paragraph 1 below (collectively, the
"Transaction"). This Agreement shall supersede any and all prior agreements or
arrangements between the Company and the Financial Advisors, except for any
indemnification agreements.
1. In connection with their activities hereunder, the Financial Advisors
will, among other things, (a) review and familiarize themselves with the
business, operations, properties, financial condition and prospects of the
Company and its subsidiaries; (b) review the Company's capital structure; (c)
make specific recommendations to the Company with respect to a transaction or
series of transactions necessary to restructure the Company's capital structure
and its operations to more appropriately reflect the Company's financial
condition and future prospects; (d) assist the Company in an analysis of the
value of the Company and it subsidiaries under differing financial scenarios;
(e) assist in the structuring and placing of debt and equity securities of the
Company to the extent requested by the Company; (f) assist in structuring and
placing an appropriate working capital facility; (g) assist in analyzing the
possible sale of all or substantially all of the Company's film library rights
(in a single transaction or series of related transactions) or the sale of other
assets of the Company; (h) assist in structuring the securities and/or other
types of considerations which may be offered to holders ("Holders") of the
Company's outstanding debt and equity securities including the amounts
outstanding under: (i) the existing Carolco Credit Facility with Credit
Lyonnais Bank Nederland N.V.; (ii) the 11.5%/10% Reducing Rate Senior Notes due
2000; (iii) the 13%/12% Reducing Rate Senior Subordinated Notes due 1999; (iv)
the 13% Senior Subordinated Notes due December 1, 1996; (v) the note payable to
the Guilds; (vi) the Series A Convertible Preferred Stock; (vii) the 7%
Convertible Subordinated Notes due 2006; (viii) the 5% Payment-in-Kind
Convertible Subordinated Notes due 2002; and (ix) the common stock of the
Company (collectively, the "Securities") in any Exchange Transaction (as defined
below) proposed by the Company and in preparing the required documentation
relating thereto; (i) to the extent consistent with applicable securities laws,
as outlined by the Company's legal advisors, including, without limitation,
Section 3(a)(9) of the Securities Act
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(as defined below), assist the Company in its communications with the Holders
and their representatives and in the negotiation of a plan of financial
restructuring proposed by the Company; and (j) to the extent consistent with
applicable securities laws, as outlined by the Company's legal advisors,
including, without limitation, Section 3(a)(9) of the Securities Act, assist the
Company in effecting any Exchange Transaction and financing proposed by the
Company. As used herein, the term "Exchange Transaction" shall mean,
collectively, one or more exchanges and/or purchases of securities by the
Company with or from Holders of the Securities in compliance with the Securities
Act of 1933, as amended, including any applicable exemption therefrom (such act
and the rules and regulations promulgated thereunder being hereinafter
collectively referred to as the "Securities Act"), on which the Financial
Advisors have rendered advice. The Financial Advisors acknowledge that they
will be non-exclusive financial advisors and agents of the Company in connection
with the activities described in paragraphs (a) through (j) above during the
term hereof.
2. In connection with the Financial Advisors' activities on the Company's
behalf, the Company will cooperate with the Financial Advisors and provide them
with all information and data concerning the Company and the Transaction (the
"Information") which the Financial Advisors deem appropriate and will provide
the Financial Advisors and any prospective financing sources with access to the
Company's officers, directors, employees, independent accountants and legal
counsel. The Financial Advisors agree to use such Information only in
connection with their agreement herein, unless otherwise agreed to by the
Company in writing. The Financial Advisors agree that such Information will be
subject to a separate confidentiality agreement acceptable to the Company. The
Company represents and warrants that to the best of its knowledge all
Information (a) made available to the Financial Advisors by the Company, or (b)
contained in any memorandum, offering document or solicitation statement
prepared by the Company with respect to the Transaction (the "Memorandum") will,
at all times during the period of the engagement of the Financial Advisors
hereunder, be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances under which they are made. The Company further represents and
warrants that any projections provided by it to the Financial Advisors will have
been prepared in good faith and will be based upon assumptions which, in light
of the circumstances under which they are made, are reasonable. The Company
acknowledges and agrees that in rendering their services hereunder, the
Financial Advisors will be using and relying on the Information (and information
available from public sources and other sources deemed reliable by the Financial
Advisors) without independent verification thereof by the Financial Advisors or
independent appraisal by the Financial Advisors of any of the Company's assets.
The Financial Advisors do not assume responsibility for the accuracy or
completeness of the Information or any other information regarding the Company,
or any Transaction. Any advice rendered by the Financial Advisors pursuant to
this Agreement may not be disclosed publicly without the Financial Advisors'
prior written consent unless required by law, rule or regulation. The Financial
Advisors acknowledge that the relationship created pursuant to this Agreement
between the Company and the Financial Advisors will constitute a related party
transaction required to be publicly disclosed by the Company in accordance with
Federal securities law. The Financial Advisors further acknowledge that this
Agreement shall be of no force or effect unless and until it shall have been
approved by the Board of Directors of the Company.
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3. In consideration of our services pursuant to this Agreement, the
Financial Advisors shall be entitled to receive, and the Company agrees to pay
the Financial Advisors a fixed fee of $1,800,000, payable over twelve months at
the rate of $150,000 per month on the 15th day of each month. All fees due
under this paragraph 3 shall be paid 60% to Daniels & Associates and 40% to
Jefferson Capital Group, Ltd.
4. In addition to the fees described in paragraph 3 above, the Company
agrees to promptly reimburse the Financial Advisors, upon request from time to
time, for all out-of-pocket expenses incurred by the Financial Advisors
(including reasonable fees and disbursements of counsel, and of other
consultants and advisors retained by the Financial Advisors, provided the
retention of such other consultants and advisors had been approved in advance by
the Company) in connection with the matters contemplated by this Agreement. The
Financial Advisors will supply to the Company, upon request for reimbursement,
documentation supporting such expenses as the Company may reasonably request.
Notwithstanding the foregoing, the Company's obligation to reimburse the
Financial Advisors pursuant to this paragraph 4 shall not exceed $100,000.
5. The Company agrees to indemnify the Financial Advisors in accordance
with the indemnification provisions in Schedule I (the "Indemnification
Provision") attached to this Agreement, which Indemnification Provisions are
incorporated herein and made a part hereof.
6. Either party hereto may terminate this Agreement at any time upon
written notice. Neither termination of this Agreement nor completion of the
assignment contemplated hereby shall affect: (i) any compensation to which the
Financial Advisors are entitled pursuant to paragraph 3 hereof, (ii) the
reimbursement of expenses incurred by the Financial Advisors up to the date of
termination or completion of the assignment contemplated hereby, as the case may
be, (iii) the provisions of paragraphs 4-6, inclusive, of this Agreement, and
(iv) the attached Indemnification Provisions which are incorporated herein, all
of which shall remain operative and in full force and effect. Notwithstanding
the foregoing, (i) in the event the Financial Advisors terminate this Agreement
at any time on or before twelve months from the date of this Agreement or the
Company terminates this Agreement at any time after six months from the date of
this Agreement, the Company's obligation to make the payments set forth in
paragraph 3 shall cease immediately and (ii) in the event the Company terminates
this Agreement at any time on or before six months from the date of this
Agreement, the Company's obligation to make the payments set forth in paragraph
3 shall be limited to $900,000.
8. The validity and interpretation of this Agreement shall be governed by
the laws of the State of New York applicable to agreements made and to be fully
performed therein.
9. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified parties
hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns. Notwithstanding
the foregoing, this Agreement may not be assigned by any party hereto without
the express written consent of the other parties.
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10. For the convenience of the parties, any number of counterparts of this
Agreement may be executed by the parties hereto. Each such counterpart shall
be, and shall be deemed to be, an original instrument, but all such counterparts
taken together shall constitute one and the same Agreement. This Agreement may
not be modified or amended except in writing signed by the parties hereto.
If the foregoing correctly sets forth our Agreement, please sign this
enclosed copy of this letter in the space provided and return it to us.
Sincerely yours,
DANIELS & ASSOCIATES, L.P.
By: Daniels Partners, Inc., its general partner
By: /s/ Michael E. Garstin
------------------------------
Michael E. Garstin
Executive Vice President
JEFFERSON CAPITAL GROUP, LTD.
By: /s/ R. Timothy O'Donnell
-----------------------------
R. Timothy O'Donnell
President
CONFIRMED AND AGREED TO THIS 19th DAY OF JANUARY , 1995
CAROLCO PICTURES INC.
By: /s/ Robert W. Goldsmith
---------------------------
Robert W. Goldsmith
Senior Vice President
SCHEDULE I
THE INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the Agreement) agrees to indemnify and
hold harmless the Financial Advisors against any and all claims, damages,
actions, proceedings, investigations, demands, liabilities, damages, judgments,
awards, assessments, losses and costs, including fees and expenses, arising out
of or in connection with any investigation or the services rendered by the
Financial Advisors under this Agreement, and will reimburse the Financial
Advisors for all such fees and expenses including the reasonable fees of counsel
as they are incurred by the Financial Advisors in connection with pending or
threatened litigation whether or not the Financial Advisors are a party. The
Company will not, however, be responsible for any claims, liabilities, losses,
damages or expenses that are determined by final judgment of a court of
competent jurisdiction to result primarily from the Financial Advisors' gross
negligence, willful misconduct or bad faith. The Company also agrees that the
Financial Advisors shall have no liability for claims, liabilities, damages,
losses or expenses, including legal fees, incurred by the Company unless they
are determined by final judgment of a court of competent jurisdiction to result
primarily from the Financial Advisors' gross negligence, willful misconduct or
bad faith.
In the event that the foregoing indemnity is unavailable to the Financial
Advisors, then the Company shall contribute to amounts paid or payable by the
Financial Advisors with respect of such losses, claims, damages, costs,
judgments, fines, liabilities or amounts paid in settlement in the proportion
that the Company's interest bears to the Financial Advisors' interest in the
matters contemplated by this Agreement (if the Financial Advisors' engagement
concerns an acquisition, divestiture or financing, the Company's interest shall
be deemed to be an amount equal to the proposed or actual consideration to be
paid or received by the Company and the Financial Advisors' interest shall be
deemed to be an amount equal to the fees actually paid to it in connection with
such engagement). If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, or otherwise, then the
Company shall contribute to such amount paid or payable by it in such proportion
as is appropriate to reflect not only such relative interests but also the
relative fault of the Company on the one hand and the Financial Advisors on the
other hand in connection with the matters as to which such losses, claims,
damages, costs, judgments, fines, liabilities or amounts paid in settlement
relate and other equitable considerations.
In case any action shall be brought against the Financial Advisors with
respect to which indemnity may be sought against the Company under this
Agreement, the Financial Advisors shall promptly notify the Company in writing
and the Company shall, if requested by the Financial Advisors, assume the
defense thereof, including the employment of counsel and payment of all fees and
expenses related thereto. The Financial Advisors shall have the right to employ
separate counsel in such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Financial
Advisors, unless: (i) the Company has failed to assume the defense and employ
counsel, or (ii) the named parties to any such action (including any impleaded
parties) include the Financial Advisors and the Company, and the Financial
Advisors shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Company; provided, however, that the Company shall not in such
event be responsible hereunder for the fees and expenses of more than one such
firm of separate counsel, in addition to any local counsel. The Company shall
not be liable for any settlement of any
Schedule I
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such action effected without the written consent of the Company, and the Company
agrees to indemnify and hold harmless the Financial Advisors from and against
any loss or liability by reason of settlement of any action effected with the
consent of the Company.